GDP Points to a Weak 2 Quarters Leaving FED with NonFarms

Last week was a bad week for the Fed once again as GDP missed big coming in at 2.3 vs. the 2.9 expected? You would never believe it though. The midia shrugged it off. Earlier in the week, the Fed came out and said they were going to raise rates this year as long as the data came out as they were expecting. But after the GDP miss and poor wages and low labor force participation rate, it is hard to see how the FED can raise rates this year or next. Bullard came out and said he wasn’t worried about the low wages and that a .25% increase in rates would have minimal effect on the markets as a whole. He went on to mention he believed inflation was going to pick back up soon and that it would be back up to their 2% target by 2016. Traders sold the buck, gold and oil and bought up bonds and stocks. The market does not think the Fed is raising rates anytime soon.

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The SPX500 rallied nicely most of the week and looks like it is topping out in a wave 2 at the 2116. From the smaller charts, the index has either finished an ending diagonal C wave or is about to needing on more push up to about 2120. Even if you favor a move to a new all-time high, the index needs to correct the move up from the 2063. So, no matter what, if you think up or down, they both point to a move down near term. If the index drops down, I favor a 1 wave of five larger down to the 2040 of even a larger five wave move still possibly in play for the index. Currently, global indexes are sporting bearish Elliott Wave patterns. In the US, the Dow Jones Transportation has cut out a clear impulsive wave series down from the 9310 November 2014 high. The index could have put in a wave 3 at the near 7970 low. Dow Jones Utilities is sporting a possible 1-2 series down from its 657 January 2015 high. Some have the move as a zigzag which is possible but not as probable for Zigzags rarely sport short C waves. Additionaly, The moves up for all the major indexes from their near lows are at the end of corrective sets backs. I expect the SPX and the other indexes to rollover soon Monday. Moreover, the Shanghai Composite Index has fallen in a nasty impulsive A wave from the 5177 Jan 14th high. The move up from the 5177 was corrective and should be complete at the 4184 July 23 high. The move down is a clear 1-2 series that could be the start of five that takes the index down to the 2805. The global picture is pointing to a very bearish future for stocks all over the planet.

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Traders sold the buck last week but it has been able to maintain above the 96.50 despite the bad data out last week. The index appears to have capped a B wave at the 97.98 July 20th high. The move to the 96.28 July 27th low counts a nice three, however the move since is technically unappealing. I have the move up from the July 27th low counted as a flat which should be done soon. We can expect the buck to move down to about the 95.50 for a C wave of the triangle I am still tracking from the 100 high. Rates look to be heading south for a bit too which should put downward pressure on the Buck.

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The US 10 year yield fell and closed on the week at 2.20 weakening the bullish bias for now. With oil, energy and commodities all bleeding red, it looks like rates too could head down further this coming week. The benchmark has a good chance now to test the 2.09 low. From there, the next line in the sand is at the 1.97 Fibonacci confluence.

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Crude has rolled over and is looking bearish. The commodity is past a good size correction and could well extend a fifth wave down to the low 30s. Price has just tested the 46.67 Blue 3 low and cold push through it. However, until this level is breached, I am still looking for a possible move up for a Blue 4 completion but no further up than the 49.50.

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Even though Gold slid red this past week, it didn’t fall much losing only .32%. The metal has been stuck in a range since its move up from the 1072 spike low. The contraction is taking the form of a triangle pattern which should be complete soon. Once so, the index will be expected to make a run for the 1040, where I will be looking for a counter corrective bounce to the 1400s at larger degree.

This week, we have US nonfarms and Aussie payrolls, trade data, personal income and spending, and US and Euro PMIs. As for the central banks, the BoE, BoJ and RBA will be speaking on monetary policy.

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